Exhibit 10.9
FORM OF
INDEMNIFICATION AGREEMENT
This Agreement, dated as of __________, 2002 is made by and between
Advantage Payroll Services, Inc., a Delaware corporation (the "Company"),
and________________ who is currently serving as an officer and/or director of
the Company (the "Indemnitee").
WHEREAS, the Indemnitee is currently serving in the capacity or
capacities described above;
WHEREAS, the Company is contemplating an initial public offering of
its common stock (the "Offering"), which may increase the risk of litigation and
other claims being asserted against the directors and officers of the Company;
WHEREAS, the Company has determined that it is in the best interests
of the Company to enter into indemnification agreements with its current
officers and/or directors of the Company;
WHEREAS, the Company wishes the Indemnitee to continue to serve in
such capacity or capacities and the Indemnitee is willing, under the current
circumstances, to continue in such capacity or capacities;
WHEREAS, damages sought and sometimes paid in many claims made against
corporate directors and officers and the expenses required to defend such
claims, whether or not the allegations are meritorious, may not bear a
reasonable relationship to the amount of compensation received by and may be
beyond the financial resources of the Indemnitee;
WHEREAS, the Indemnitee is currently entitled to indemnification under
Delaware General Corporation Law, the Restated Certificate of Incorporation and
the By-laws of the Company, which the Indemnitee does not regard to be adequate
protection against the risks associated with his service to or at the request of
the Company:
WHEREAS, the Indemnitee and the Company have concluded that the
exposure to risk of personal liability and payment of damages out of the
Indemnitee's personal assets may result in an unhealthy conservative direction
and supervision of the Company's affairs, which is detrimental to the best
interests of the Company and its stockholders; and
WHEREAS, the Company has concluded that additional protection is
appropriate for its directors and elected officers.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby:
Section 1. Definitions.
(a) "Agent" of the Company shall mean any person who is or was a
director, officer, employee, agent or fiduciary of the Company or a subsidiary
of the Company, or is or was serving at the request of, for the convenience of,
or to represent the interests of the Company or a subsidiary of the Company as a
director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise or entity, including
service with respect to an employee benefit plan.
(b) "Disinterested Director" of the Company shall mean a director of
the Company who is not and was not a party to the proceeding for which
indemnification is being sought by the claimant.
(c) "Expenses" shall include all direct and indirect costs of any type
or nature whatsoever (including, without limitation, all attorneys' and expert
witness fees and related disbursements, other out-of-pocket costs and reasonable
compensation for time spent by the Indemnitee for which he is not otherwise
compensated by the Company or any third party) actually and reasonably incurred
by the Indemnitee in connection with either the investigation, defense or appeal
of a proceeding or establishing or enforcing a right to indemnification under
this Agreement, Section 145 of the General Corporation Law of Delaware, the
Company's Restated Certificate of Incorporation or By-laws or otherwise;
provided, however, that expenses shall not include any judgments, fines, excise
taxes or penalties under the Employee Retirement Income Security Act of 1974
("ERISA"), or amounts paid in settlement of a proceeding brought pursuant to
ERISA.
(d) "Independent Legal Counsel" shall mean a law firm, a member of a
law firm, or an independent practitioner, who is experienced in matters of
corporation law and shall include any person who, under the applicable standards
of professional conduct then prevailing, would not have a conflict of interest
in representing either the Company or the Indemnitee in an action to determine
the Indemnitee's rights under this Agreement.
(e) "Proceeding" shall mean any threatened, pending, or completed
action, suit or other proceeding, whether civil, criminal, administrative,
investigative or any other type whatsoever.
(f) "Subsidiary" shall mean any corporation, partnership, joint
venture or other enterprise, a majority of whose equity interests are owned by
the Company, directly or through one or more other subsidiaries.
Section 2. Agreement to Serve. The Indemnitee agrees to serve as a
director, officer or Agent of the Company, at its will (or under separate
agreement, if such agreement exists), in the capacity Indemnitee currently
serves, so long as he is duly appointed or elected and qualified in accordance
with the applicable provisions of the By-Laws of the Company or any subsidiary
of the Company or until such time as he tenders his resignation in writing or
his term is otherwise
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completed; provided, however, that nothing contained in this Agreement is
intended to create any right to continued service to or employment with the
Indemnitee.
Section 3. Mandatory Indemnification. Subject to the limitations set
forth in Section 7, if the Indemnitee is a person who was or is a party or is
threatened to be made a party to or is involved, including involvement as a
witness, in any proceeding, including any action by or in the right of the
Company, by reason of the fact that he is or was or has agreed to become an
Agent, or by reason of any action alleged to have been taken or omitted by him
in any such capacity, the Company shall indemnify the Indemnitee against all
expense, liability and loss (including but not limited to judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement),
actually and reasonably incurred by him in connection with the investigation,
defense, settlement or appeal of such proceeding; provided, however, that except
as provided in Section 7(c) of this Agreement with respect to proceedings
seeking to enforce rights to indemnification, the Company shall indemnify the
Indemnitee in connection with a proceeding (or part thereof) initiated by the
Indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Company.
Section 4. Mandatory Advancement of Expenses. The Company shall
advance all expenses as and when incurred by the Indemnitee in connection with
the investigation, defense, settlement or appeal of any proceeding referred to
in Section 3 to which the Indemnitee is a party or is threatened to be made a
party or with respect to which the Indemnitee is otherwise involved (including
involvement as a witness) as an Agent of the Company. The Indemnitee hereby
undertakes to repay such amounts advanced if, but only if and to the extent
that, it shall ultimately be determined pursuant to the provisions hereof that
the Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to the
Indemnitee within twenty (20) days following delivery of a written request
therefor by the Indemnitee to the Company; provided, however, that, if and to
the extent that the Delaware General Corporation Law requires, an advancement of
expenses incurred by the Indemnitee in his capacity as a director or officer
shall be made only upon delivery of an undertaking by or on behalf of the
Indemnitee to repay all amounts so advanced if it shall ultimately be determined
by final judicial decision from which there is no further right to appeal that
the Indemnitee is not entitled to be indemnified for such expenses under this
Agreement or otherwise.
Section 5. Maintenance of D&O Insurance.
(a) So long as the Indemnitee shall continue to serve in any capacity
described in Section 2 and thereafter so long as there is any reasonable
possibility that the Indemnitee shall be subject to any proceeding by reason of
the fact that the Indemnitee served in any of such capacities, the Company will
use reasonable efforts to purchase and maintain in effect for the benefit of the
Indemnitee one or more valid, binding and enforceable policies of directors' and
officers' liability insurance ("D&O Insurance") providing, in all respects,
coverage and amounts as reasonably determined by the Board of Directors.
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(b) Notwithstanding Section 5(a), the Company shall not be required to
maintain D&O Insurance if such is not reasonably available or if, in the
reasonable business judgment of the Board of Directors of the Company as it may
exist from time to time, either (i) the premium cost for such insurance is
substantially disproportionate to the amount of insurance or (ii) the coverage
is so limited by exclusions that there is insufficient benefit provided by such
insurance.
Section 6. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that the indemnification with respect thereto
properly may be sought from the Company under this Agreement, notify the Company
of the commencement or threat of commencement thereof. The failure to notify or
promptly notify the Company shall not relieve the Company from any liability
which it may have to the Indemnitee otherwise than under this Agreement, and
shall relieve the Company from liability hereunder only to the extent the
Company has been prejudiced.
(b) If, at the time of the receipt of a notice of the commencement of
a proceeding pursuant to Section 6(a), the Company has D&O Insurance in effect,
the Company shall give prompt notice of the commencement of such proceeding to
the insurers in accordance with the procedures set forth in the D&O Insurance
policy. The Company shall thereafter take all necessary or desirable action to
cause such insurers to pay, to or on behalf of the Indemnitee, all amounts
payable as a result of such proceeding in accordance with the terms of such
policy.
(c) In the event the Company shall be obligated to pay the expenses of
the Indemnitee in connection with any proceeding, the Company shall be entitled
to assume the defense of such proceeding, with counsel subject to the reasonable
approval of the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election to do so. After delivery of such notice, approval of such
counsel by the Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to the Indemnitee under this Agreement for any fees
of counsel or other expenses subsequently incurred by the Indemnitee with
respect to the same proceeding; provided that (i) the Indemnitee shall have the
right to employ his own counsel in any such proceeding at the Indemnitee's
expense and (ii) if (A) the employment of counsel by the Indemnitee has been
previously authorized by the Company, or (B) the Indemnitee shall have concluded
upon the advice of counsel that there is a conflict of interest between the
Company and the Indemnitee in the conduct of any such defense, or (C) the
Company shall not, in fact, have employed counsel to assume the defense of such
proceeding, the fees and expenses of the Indemnitee's counsel shall be paid by
the Company; and provided further that the Company shall not be required to pay
the expenses of more than one such separate counsel for persons it is
indemnifying in any one proceeding.
Section 7. Determination of Right to Indemnification.
(a) To the extent the Indemnitee has been successful on the merits or
otherwise in defense of any proceeding referred to in Section 3 or in the
defense of any claim, issue or matter
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described therein, the Company shall indemnify the Indemnitee pursuant to
Section 3 against expenses actually and reasonably incurred by him in connection
with the investigation, defense, or appeal of such proceeding. If the Indemnitee
has not been successful on the merits or otherwise in any such defense, the
Company also shall indemnify the Indemnitee pursuant to Section 3 unless, and
only to the extent that, the Indemnitee has not met the applicable standard of
conduct under the Delaware General Corporation Law as it now exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader indemnification
rights than said law permitted the Company to provide prior to such amendment).
(b) Subject to the provisions of Section 8 relating to a Change in
Control (as defined therein), the determination as to whether the Indemnitee is
entitled to indemnification shall be made as follows: (1) if requested by the
Indemnitee, by Independent Legal Counsel selected by the Indemnitee with the
consent of the Company (which consent shall not be unreasonably withheld) or (2)
if no request is made by the Indemnitee for a determination by Independent Legal
Counsel, (i) by a quorum of the Board of Directors consisting of Disinterested
Directors or (ii) if such quorum is not obtainable or, even if obtainable, if a
quorum of Disinterested Directors so directs, by Independent Legal Counsel in a
written opinion.
(c) Notwithstanding a determination that the Indemnitee is not
entitled to indemnification with respect to a specific proceeding, the
Indemnitee shall have the right to apply to the court of Chancery of Delaware,
the court in which that proceeding is or was pending or any other court of
competent jurisdiction, for the purpose of enforcing the Indemnitee's right to
indemnification or the advance payment of expenses pursuant to this Agreement.
The burden of proof shall be on the Company in any such suit to demonstrate by
the weight of the evidence that the Indemnitee is not entitled to
indemnification or advance payment of expenses. The Indemnitee's expenses
incurred in successfully establishing his right to indemnification or
advancement of expenses, in whole or in part, in any such action (or settlement
thereof) shall be paid by the Company.
(d) Notwithstanding anything in Sections 3 or 4 to the contrary, the
Company shall not be liable under this Agreement to make any indemnity payment
or advancement of expenses in connection with any proceeding (i) to the extent
that payment is actually made, or for which payment is available, to or on
behalf of the Indemnitee under an insurance policy, except in respect of any
amount in excess of the limits of liability of such policy or any applicable
deductible under such policy; (ii) to the extent that payment has been or will
be made to the Indemnitee by the Company otherwise than pursuant to this
Agreement; or (iii) to the extent that there was a final adjunction by a court
of competent jurisdiction that the Indemnitee has not met the applicable
standard of conduct required to entitle the Indemnitee to indemnification under
the Delaware General Corporation Law as it now exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
said law permitted the Company to provide prior to such amendment).
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Section 8. Change In Control.
(a) The Company agrees that if there is a Change in Control, as
defined below, of the Company (other than a Change in Control which has been
approved by a majority of the members of the Board of Directors who were
directors immediately prior to such Change in Control), then with respect to all
matters thereafter arising concerning the rights of the Indemnitee to indemnity
payments and advance payments of expenses under this Agreement, the Company and
the Indemnitee shall seek legal advice only from Independent Legal Counsel
selected by the Indemnitee with the consent of the Company (which shall not be
unreasonably withheld). Such counsel, among other things, shall render a written
opinion to the Company and the Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under this Agreement and
applicable law. The Company agrees to pay the reasonable fees of the Independent
Legal Counsel and to indemnify such counsel fully against any and all expenses
(including attorneys' fees), claims, liabilities and damages arising out of or
relating to this Agreement or counsel's engagement pursuant hereto.
(b) Alternatively, the Indemnitee may choose to submit all matters
arising concerning his rights to indemnity payments and advance payments of
expenses under this Agreement to a panel of three arbitrators, one of whom is
selected by the Company, another of whom is selected by the Indemnitee and the
third of whom is selected by the first two arbitrators so selected. Any such
submission shall be governed by the Commercial Arbitration Rules of the American
Arbitration Association and shall be deemed to be a submission within the
meaning of the Federal Arbitration Act or any statutory modification or
re-enactments thereof. Arbitration proceedings shall take place in Portland,
Maine, unless otherwise agreed to by the parties.
(c) "Change in Control" for purposes of this Agreement shall be deemed
to have occurred if (a) any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation owned
directly or indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 20% or more of the total
voting power represented by the Company's then outstanding voting securities,
except that a person who as of the date of this Agreement owns 20% or more of
the total voting power represented by the Company's outstanding voting
securities shall not be deemed to have caused a Change in Control, or (b) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors and any new director whose election by
the Board of Directors or nomination for election by the Company's stockholders
was approved by a vote of at least two-third (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or (c) the stockholders of the Company
approve a merger, plan of complete liquidation of the Company, an agreement for
the sale or disposition by the Company of all or any substantial part of the
Company's
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assets, or other business combination of the Company with any other corporation,
other than a business combination which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 80% of the total voting power represented by the
voting securities of the Company or such surviving entity outstanding
immediately after such business combination.
Section 9. Limitation of Actions and Release of Claims. No proceeding
shall be brought and no cause of action shall be asserted by the Company or any
subsidiary or by any stockholder on behalf of the Company or any subsidiary
against the Indemnitee, his spouse, heirs, estate, executors or administrators
after the expiration of one year from the act or omission of the Indemnitee upon
which such proceeding is based; provided, however, that in the event that the
Indemnitee has fraudulently concealed the facts underlying such cause of action,
no proceeding shall be brought and no cause of action shall be asserted after
the expiration of one year from the earlier of (i) the date the Company or any
subsidiary of the Company discovers such facts or (ii) the date the Company or
any subsidiary of the Company could have discovered such facts by the exercise
of reasonable diligence. Any claim or cause of action of the Company or any
subsidiary of the Company, including claims predicated upon the negligent act or
omission of the Indemnitee, shall be extinguished and deemed released unless
asserted by filing of a legal action within such period. This Section 9 shall
not apply to any cause of action which has accrued on the date hereof and of
which the Indemnitee is aware on the date hereof but as to which the Company has
no actual knowledge apart from the Indemnitee's knowledge.
Section 10. Non-exclusivity. The provisions for indemnification and
advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee may have under any provision
of law, the Company's Restated Certificate of Incorporation or By-Laws, the vote
of the Company's stockholders or Disinterested Directors, other agreements, or
otherwise, both as to administrators in his official capacity and to action in
another capacity while occupying his position as an Agent of the Company, and
the Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an Agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee.
Section 11. Settlement. The Company shall not be liable to indemnify
the Indemnitee under this Agreement for any amounts paid in settlement of any
proceeding without its written consent, which consent shall not be unreasonably
withheld. The Company shall not settle any proceeding which would impose any
penalty or limitation on the Indemnitee without the Indemnitee's written
consent, which consent shall not be unreasonably withheld. In the event that
consent is not given and the parties hereto are unable to agree on a proposed
settlement, Independent Legal Counsel shall be retained by the Company, at its
expense, with the consent of the Indemnitee, which consent shall not be
unreasonably withheld, for the purpose of determining whether or not the
proposed settlement is reasonable under all the circumstances; and if
Independent Legal Counsel determines the proposed settlement is reasonable under
all the circumstances, the settlement may be consummated without the consent of
the other party.
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Section 12. Subrogation Rights. In the event of any payment under this
Agreement, the Company shall be subrogated to the extent of such payment to all
of the rights of recovery of the Indemnitee against any person or organization
and the Indemnitee shall execute all papers required and shall do everything
that may be reasonably necessary to secure such rights.
Section 13. Allowance for Compliance with Commission Requirements.
Indemnitee acknowledges that the Securities and Exchange Commission (the
"Commission") has expressed the opinion that indemnification of directors and
officers from liabilities under the Securities Act of 1933 (the "Act") is
against public policy as expressed in the Act and is, therefore, unenforceable.
Indemnitee hereby acknowledges and agrees that it will not be a breach of this
Agreement for the Company to undertake with the Commission in connection with
the registration for sale of any shares or other securities of the Company from
time to time that, in the event a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director or officer of the Company in the successful defense of any action,
suit or proceeding) is asserted in connection with such shares or other
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of competent jurisdiction the question of whether or not such indemnification by
the Company is against public policy as expressed in the Act and the Company
will be governed by the final adjudication of such issue. Indemnitee further
agrees that such submission to a court of competent jurisdiction shall not be a
breach of this Agreement.
Section 14. Interpretation of Agreement. It is understood that the
parties hereto intend this Agreement to be interpreted and enforced so as to
provide indemnification and payments for Expenses to the Indemnitee to the
fullest extent permitted by applicable law and to waive or render inapplicable
to the fullest extent permitted by applicable law which would impose any
condition or limitation upon, or otherwise impair or prohibit the enforcement
of, any provision in this Agreement. Indemnitee's rights hereunder shall apply
to claims made against Indemnitee arising out of acts or omissions which
occurred prior to the date hereof as well as those which occur after the date
hereof.
Section 15. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby and (ii) to
the fullest extent possible, the provisions of this Agreement (including,
without limitation, all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable and to give effect to Section 14.
Section 16. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No
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waiver of any of the provisions of this agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
Section 17. Successors and Assigns. The terms of this Agreement shall
bind, and shall inure to the benefit of, the successors and assigns of the
parties hereto.
Section 18. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (i) on the date of delivery if delivered by hand or via telecopy or (ii)
on the second business day after being deposited in the U.S. mail (registered or
express), postage prepaid. Addresses for notice to either parry are as shown on
the signature page of this Agreement, or as subsequently modified by written
notice. Each party agrees to receipt for any notice received promptly upon
request.
Section 19. Governing Law. This Agreement shall be governed
exclusively by and construed according to the laws of the State of Delaware, as
applied to contracts between Delaware residents entered into and to be performed
entirely within Delaware.
Section 20. Consent to Jurisdiction. The Company and the Indemnitee
each hereby irrevocably consents to the jurisdiction of the courts of the State
of Delaware and the Company irrevocably consents to the jurisdiction of any
court in which an Indemnitee brings action pursuant to Section 7(c), for all
purposes in connection with any proceeding which arises out of or relates to
this Agreement. The Company agrees not to initiate any such action or proceeding
in any state other than Delaware.
Section 21. Effectiveness. This Agreement shall be deemed effective as
of: (i) __________________, 2002, in the event that the Indemnitee was serving
as an officer and/or director of the Company as of that date or (ii) if the
Indemnitee was not serving as an officer and/or director of the Company on
__________________, 2002, the date the Indemnitee was first elected or
appointed, as the case may be, to serve as an officer and/or director of the
Company.
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IN WITNESS WHEREOF, the parties hereto have entered into this
Indemnification Agreement effective as of the date first above written.
Advantage Payroll Services, Inc.
126 Merrow Road
P.O. Box 1330
Auburn, Maine 04211-1330
Telecopy No.: (207) 786-0490
By:________________________________
Its:_______________________________
INDEMNITEE:
___________________________________
Name:______________________________
Title:_____________________________
Address:___________________________
___________________________
Telecopy No.:______________________
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